As an auditor, express your comments/views on the following situation: (5 marks June 2011)
a) The Board of Directors meeting of M/s Universal Commercial Bank Limited having its registered office at Kathmandu, Nepal proposed dividend @ 30% for the year 2066/067. The Annual General Meeting approved the dividend @ 25% instead of the proposed dividend the Board of Directors. Examine the decision of the Annual General Meeting to approve dividend less than the dividend proposed the Board of Directors whether it is commensurate with the company Act, 2063?
The Annual General Meeting is authorized body to approve dividend under section 77 (6) of the Company Act 2063. The proviso of the said section has however, restricted the Annual General Meeting to approve the dividend in excess of the dividend proposed the Board of Directors. However, the dividend at lower rate can be approved. Thus, the decision of Annual General Meeting of M/s Universal Commercial Bank Limited to approve dividend @ 25% (at the rate lower than the rate proposed the Board of Directors) is commensurate with the provision of the Companies Act, 2063.